Section 263 revision not justified where the Assessing Officer examined section 28 interest on enhanced compensation and adopted a plausible view.

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was treated as part of the compensation, and the assessment records showed that the Assessing Officer had queried the issue and accepted the assessee's explanation. On that basis, the matter could not be characterised as a case of no enquiry or lack of enquiry, and the absence of detailed discussion in the assessment order did not by itself make the order erroneous. The revision under section 263 was therefore not available where the assessment had adopted one possible view on a debatable issue, even if the Principal Commissioner preferred a different view or relied on an audit objection.

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Issues: Whether the Principal Commissioner was justified in revising the assessment under section 263 on the ground that interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was taxable as income from other sources and whether the assessment order suffered from lack of enquiry or was otherwise erroneous and prejudicial to the interests of the Revenue.

Analysis: The assessment records showed that the Assessing Officer had specifically queried the receipt of interest on enhanced compensation and the assessee had explained that the amount represented interest under section 28 of the Land Acquisition Act, 1894 and formed part of enhanced compensation. The explanation was accepted in the assessment. On these facts, the matter could not be characterised as a case of no enquiry or lack of enquiry. A mere absence of elaborate discussion in the assessment order did not render it erroneous. The revision was also founded substantially on an audit objection and on reliance placed on the decision in Mahender Pal Narang, but that decision was treated as fact-specific and not sufficient to displace the binding effect of the Supreme Court's ruling that interest under section 28 is an accretion to compensation. The Tribunal further held that the amended provisions concerning taxation of interest on compensation were intended to address the accrual and year-of-taxability issue and did not alter the character of interest under section 28 into a revenue receipt in the manner contended by the Revenue. Since the assessment was made on one of the possible views and the issue was at least debatable, the jurisdiction under section 263 could not be assumed.

Conclusion: The revisionary order under section 263 was unsustainable and the assessee succeeded.

Ratio Decidendi: Where the Assessing Officer has applied his mind to a queried issue and adopted one of two possible views on a debatable question, the assessment order cannot be revised under section 263 merely because the Principal Commissioner prefers a different legal view or relies on an audit objection.

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